Molefe’s comments on tariff increases ‘ignore several issues’

Responding to the recent press statement by Brian Molefe that Transnet would do everything possible to keep tariff increases below double digits as it sets out on a major expansion and maintenance programme, commentators in the private sector suggested that it ignored the facts surrounding the matter and was a meaningless attempt to placate port users. According to the CE of the Transnet Group (See FTW April 20 issue), Transnet’s method of prefunding would not come through increased tariffs, rather through increased future traffic volumes through the ports. Molefe agreed that the Transnet prefunding decision would no doubt be debated as there continued to be major questions around monopoly businesses prefunding their capex using tariffs. “We will also see debates around Transnet using consumer money for the investment programme, but we are of the opinion that this is the best option,” he said. Andrew Pike, maritime legal specialist and an immediate past member of the SA Ports Regulator team, felt that Molefe’s statement that Transnet was budgeting for tariff increases of 2% above consumer price inflation (CPI) during the next seven years was contradicted by the facts of the matter. “Molefe’s additional idea of a shareholder ‘zero dividend policy’ is to be welcomed,” he told FTW, “as this will avoid the ongoing concern of crosssubsidisation of Transnet by its subsidiary, the Transnet National Ports Authority (TNPA).” And although the idea of keeping increases in single-digit territory sounds reasonable, proposed increases of 7% or 8% ignore a number of issues. First of these, according to Pike, was the fact that all increases are subject to regulation and a proper assessment by the SA Ports Regulator of the TNPA revenue. “So,” he added, “it isn’t possible at this stage simply to say that the increases will relate to CPI plus a percentage.” Next in line was the compounding effect of those sorts of increases year-on-year, and the fact that arguably, having regard to the latest tariff assessment, TNPA is already earning sufficient revenue on existing tariffs to fund its capex programme. “His statement also ignores the possibility of increasing TNPA revenues on current tariffs by improving productivity and efficiencies so that no, or minimal, increases will be necessary,” Pike said, “and the revenue over-recoveries in the past few years and claw-backs by the Regulator.” Pike pointed, in particular, to the last tariff assessment, where the Regulator established a “war chest” by creating an excessive tariff increase margin credit (ETIMC) of R900 million – which may only be used by TNPA with the agreement of the Regulator and is for purposes of smoothing future tariff increases where capex demands are high. “All of the above factors must therefore be taken into account,” he said, “and trying to predict increases at this stage seems to be counterproductive.”